10/16/2017 Setting up oil marketing companies likely to cost Rs7bn - Newspaper - DAWN.

COM

Setting up oil marketing companies likely to cost

Rs7bn
|

ISLAMABAD: After facilitating a selective few, the government is contemplating to

increase the cost of opening new oil marketing companies (OMCs) by 14 times from

Rs500 million to at least Rs7 billion to limit their mushroom growth.

This comes following the opening of floodgates by Oil and Gas Regulatory Authority
(Ogra) when it granted 21 fresh licences in just six months (July-Dec 2016) compared to
20 over the past 70 years.

The 21 companies were expected to invest a total of about Rs10.5bn over the next few
years to set up storage and filling stations in various parts of the country.

All these licences were issued on the basis of criteria approved by the Economic
Coordination Committee (ECC) of the Cabinet. The government has been under pressure
from the big OMCs to rein in mushrooming growth of companies to protect quality
investment.
https://www.dawn.com/news/print/1339310 1/5
10/16/2017 Setting up oil marketing companies likely to cost Rs7bn - Newspaper - DAWN.COM

The Ministry of Petroleum and Natural Resources is currently in discussions with all the
stakeholders including market players and the regulator to put up a summary for
approval by the ECC to introduce New Criteria for POL Product Marketing Companies
2017.

Under the proposed criteria the prospective company would need to have Rs1bn for
transport plan, Rs4bn for investment plan and at least Rs2bn equity as paid-up capital,
besides arranging funds for working capital and oil supplies, etc.

Govt considers raising the cost by 14 times for new oil

marketing companies

The company would now be required to apply for marketing license in accordance with
the provisions of the Pakistan Oil (Refining, Blending, Transportation, Storage and
Marketing) Rules, 2016 and provide 3-year plans like marketing plan, retail development,
transportation, infrastructure development and investment plans with its application.

They would be required to explain in detail the proposed business volumes for retail and
non-retail products on regional basis along with firm supply arrangements with local
refineries and import arrangements for estimated volumes over and above the supplies to
be arranged from local refineries.

They would also need to specify cities and locations where the retail sites would be set up
covering both rural and urban areas. However, the prospective company shall be
https://www.dawn.com/news/print/1339310 2/5
10/16/2017 Setting up oil marketing companies likely to cost Rs7bn - Newspaper - DAWN.COM

obligated to set up minimum of 10 per cent of its expected retail population to service
remote and far flung areas with minimum facilities in accordance with specific
regulations to be separately announced by the Ogra.

Under the transport plan, the company would be required to envisage in detail the modes
to be used with the commitment that petroleum products safety and transport standards
will be strictly complied with. However, the company would be required to invest a
minimum of Rs1bn or more for arranging company owned tank truck fleet equipped with
vehicle tracking system.

The company would also be required to submit a three-year infrastructure development

plan. This would be based on province-wise regional demand with details of installations,
storages and terminals at different locations, depots and capacities corresponding to the
business strategy.

On top of that, the new company would be required to construct minimum storage of
15,000 tonnes each of high speed diesel and petrol or storage equivalent to minimum 20
days of annual average sale of the first year, whichever is higher prior to start of sales.
The company dependant on import sourcing shall create adequate storage and terminal
facilities at ports.

In addition, an investment plan would be required based on estimated business volumes

and associated economics with the provisions to make cumulative investment of Rs4bn
or more in the infrastructure and transport development, excluding the investment on
retail development plan with a minimum upfront equity of Rs2bn in the share of paid-up
capital at the time of application.
https://www.dawn.com/news/print/1339310 3/5
10/16/2017 Setting up oil marketing companies likely to cost Rs7bn - Newspaper - DAWN.COM

The new company would be entitled to procure, store, market and sell non retail
petroleum products once they are granted marketing licence by the regulator. However,
they will have to construct mandatory storages equivalent to 20 days demand for those
products in accordance with marketing and infrastructure plans. Marketing License shall
provisional for 3 years and it shall be confirmed only, when the Infrastructure
Development, Transport and Investment Plans are fully executed.

Existing, approved OMCs shall also develop minimum storage of 15,000 MT each of
HSD/MS or storage equivalent to 20 days of their annual average sales of the previous
year, whichever is higher, within the next 3 years. Existing approved OMCs must also
invest Rs1bn or more for arranging company owned tank truck fleet equipped with
vehicle tracking system within the next 3 years.

Existing approved OMCs shall also be obligated to set up minimum 10pc of its expected
retail population to service remote and far flung areas with minimum facilities to be
declared by the Regulating Authority, within the next three years. Existing OMCs
dependent on import sourcing shall also create adequate storage/terminal facilities at
ports.

No construction work shall commence at any storage/ infrastructure project prior to the
clearance obtained from the Ministry of Defence for which request shall be routed
through Ministry of Petroleum and Natural Resources.

Retail outlets of an OMC shall not be eligible to sell products procured from any other
OMC. Accordingly, all sorts of commercial arrangements and agreements between OMCs

https://www.dawn.com/news/print/1339310 4/5
10/16/2017 Setting up oil marketing companies likely to cost Rs7bn - Newspaper - DAWN.COM

for obtaining product from each other would be strictly prohibited and shall be penalised
by the Ogra.

Published in Dawn, June 14th, 2017

https://www.dawn.com/news/print/1339310 5/5